Australian Banks Hold Back on Apple Pay Support Due to Fees

[MacRumors]

Nearly ten months after Apple Pay launched in the United States, an increasing number of retailers including Rite Aid and Best Buy have reversed course and announced support for the mobile payments service.

Nevertheless, the United Kingdom is the only country that Apple Pay has expanded to since last October due to roadblocks from major banks and financial institutions in other countries.

Australia may offer a few clues as to why the international rollout of Apple Pay has taken so long, as The Sydney Morning Herald this week reported that its parent company Fairfax Media believes big banks in the country are unwilling to allow Apple to share a portion of the $2 billion interchange fees they collect from merchants each year in return for use of payment infrastructure.

In the United States, Apple is believed to earn about 15¢ on every $100 of transactions. It is understood Apple has been asking for the same amount of interchange fee in Australia.

But Australia's big banks will not agree to this level given that interchange fees in Australia are about half the US level - equivalent to an average of 50¢ $100 of transaction compared with about $1 for $100 of transaction fees in the US.

Commonwealth Bank of Australia chief executive Ian Narev opined that Apple Pay's launch in Australia will not be as easy compared to the United States because tap-to-pay transactions are already possible in the country. Narev says that his bank -- and many others in Australia -- implemented the underlying technology for Apple Pay between 18 months and two years ago.

Mr Narev said CBA had already offered the same functionality as Apple Pay through its app - for users of Android phones - for two years, so it was difficult for Apple to argue it is providing much value. In the US, Apple Pay was innovative because tap-and-go was not a feature of that market.

The report claims that Australian banks are also withholding Apple Pay support due to the Reserve Bank of Australia, the country's central bank and banknote issuing authority, forcing the financial institutions to invest hundreds of millions of dollars in the New Payments Platform, a "fast, versatile, data-rich payments system" that businesses will connect to for accepting low-value payments.

As well as being fast, the NPP will be versatile. The basic infrastructure will support various "overlay" services - specially tailored services which individual financial institutions may choose to offer their customers.

This multi-layered infrastructure has been designed to promote competition and drive innovation in payment services. It ensures the NPP will be equipped to meet the evolving needs of Australians in the digital age - and beyond.

Beyond Australia, Apple is planning to launch Apple Pay in Canada in November, according to The Wall Street Journal. The mid-April report claimed that six Canadian banks were in talks with Apple, including the Royal Bank of Canada, TD Canada Trust, Scotiabank, Bank of Montreal, CIBC and the National Bank of Canada. Meanwhile, Apple Pay faces similar roadblocks in China related to fees and market control.

Article Link: Australian Banks Hold Back on Apple Pay Support Due to Fees

 

[Benjamin Frost]

I’ll be interested to try Apple Pay if I get a new iPhone this year or next.

That said, it's not the most exciting thing. I'm not convinced yet that it's worthwhile for Apple to be bothering with it. I don't see it as being beneficial to the ecosystem, nor is it a profit driver.

 

[keysofanxiety]

Similar sort of thing in Europe. Chip & pin is already the standard, so from a retailer's perspective there's little incentive to add Apple Pay, especially with the costs of training people how to use it and buying the necessary equipment.

Not to say Apple Pay is bad.

 

[b0nd18t]

I never understood how Apple can charge a small fee to accept Apple pay. They don't have the clout in that arena to force the fee. I went to a super busy Panera off the highway yesterday and I was the first person to use Apple pay there, that the cashier has seen.

 

[dampfnudel]

So why doesn't Apple ask for 5 or 7 cents in countries with lower interchange fees than the US? That would be the logical thing to do.

 

[jayducharme]

I never understood how Apple can charge a small fee to accept Apple pay.

I don't understand this either. I know that Apple would like to increase its revenue streams. But to me it makes more sense to simply offer ApplePay as a free option for banks -- which would mean a more rapid adoption, which would then help to sell more iPhones. Arguably, Apple has a lot of customers that it's bringing to the table. But if few banks (or vendors) support ApplePay, Apple might as well have no customers at the table.

 

[thmsup]

It will never be introduced here in Germany, because my fellow Germantards are all counting their 1,2 and 5 cent coins at the register. Yay us. Long live the progress!

 

[iMerik]

For those that don't understand how Apple can get away with charging a fee, I've heard theories that Apple could, if it wanted to, start its own bank and push hard to attract its users to move their money into it. So instead of Apple stealing banking customers/members away from banks, credit unions, and credit cards, Apple provides a secure and convenient service for its users that doesn't threaten financial institutions and might even excite some financial institutions if they see it as a way to attract more customers (we support ultra secure Apple Pay and neighbor bank doesn't). Think of how much it might have cost a bank to first implement online banking, P2P payments, etc., to stay relevant, then the fee might not seem actually cheap to also provide Apple Pay as a "bank with us" selling point.

 

[ElRojito]

I use applepay multiple times a day. I absolutely love it. I'm bummed out for Australian customers as its one of my favorite features of my watch and iPhone 6

 

[SnarkyBear]

I don't understand this either. I know that Apple would like to increase its revenue streams. But to me it makes more sense to simply offer ApplePay as a free option for banks -- which would mean a more rapid adoption, which would then help to sell more iPhones. Arguably, Apple has a lot of customers that it's bringing to the table. But if few banks (or vendors) support ApplePay, Apple might as well have no customers at the table.

I doubt that Apple Pay is a significant selling point. An article I just read shows 7 of 8 iPhone users with Apple Pay do NOT use it. I don't use it. I understand it is and infant technology, but not yet a deal breaker for current and prospective customers

 

[SBlue1]

I never understood how Apple can charge a small fee to accept Apple pay.

Easy: Lets say the credit card companies charge the merchant 1% of the transaction in the US. Those credit card companies make their living from this 1%, pay for the infrastructure and make up for fraud transactions. Now Apple told them they can reduce fraud if the credit card companies use Apple Pay, but would like to have a portion of that 1%. Win win win for all. Merchants don't loose money on stolen cards, credit card companies loose less money on fraud use and Apple makes some money as the middle man guaranteeing a safer system.

Now in Australia (and probably Europe) the credit card companies don't charge that much so either Apple has to agree on taking a smaller cut or the credit card companies agree to keep a smaller part.

 

[Yumbo]

Similar sort of thing in Europe. Chip & pin is already the standard, so from a retailer's perspective there's little incentive to add Apple Pay, especially with the costs of training people how to use it and buying the necessary equipment.

Not to say Apple Pay is bad.

No need to train or buy new equipment in Australia.
All about the money.

 

[SBlue1]

Its like Apple taking a 30% cut of music and app sales. Why should they? Well it's like the record shops taking that 30%.

 

[babyj]

Given that bank fees are soon to be capped at 0.2%/0.3% for debit/credit cards across the EU I find it very hard to believe that the UK banks have agreed to pay Apple 0.15% for Apple Pay, maybe a third of that at best. I doubt the fees are the main issue in Australia, more likely Apple just haven't got round to it yet.

Don't see Apple Pay ever being a money spinner for Apple, a bit more than covering their costs at best.

 

[kcirtap00]

Mr Narev said CBA had already offered the same functionality as Apple Pay through its app - for users of Android phones - for two years, so it was difficult for Apple to argue it is providing much value. In the US, Apple Pay was innovative because tap-and-go was not a feature of that market.

Yeah, but how many people actually used it on their Android phones? At least in the US, nobody even mentioned Google Wallet until Apple Pay came along.

 

[patrickbarnes]

MacRumors missed the most important part of that entire article:

In Britain, the banks were successful in negotiating Apple down to a much lower fee. Apple is receiving only a few pence a £100 transaction, the Financial Times reported last month.
​

So really... it will happen when Apple agrees to reduce their take (which they will).

 

[mrgraff]

Send Taylor Swift down there. She'll sort it out.

 

[MrX8503]

I never understood how Apple can charge a small fee to accept Apple pay. They don't have the clout in that arena to force the fee. I went to a super busy Panera off the highway yesterday and I was the first person to use Apple pay there, that the cashier has seen.

Apple Pay is possibly the most secure form of payment. Apple convinced banks that they'll save more money with Apple Pay because it'll reduce fraud.

 

[simonsimon]

I use applepay multiple times a day. I absolutely love it. I'm bummed out for Australian customers as its one of my favorite features of my watch and iPhone 6

Don't be bummed out. We've had tap and go payment in Australia for over 3 years now. For transactions under $100, you just tap your credit card on their device and that's it. Paid.
Anything over that is insert the card (chip, not magnetic strip) and PIN number. Been that way for along time.

I find it weird when I visit the USA and have to sign for my credit card purchases.

 

[redtapemedia]

So they're fine with no PIN or any kind of security for purchases under $100? Sure, their solution is much better than Apple Pay, who wants security anyway.

 

[fitshaced]

Apple Pay is possibly the most secure form of payment. Apple convinced banks that they'll save more money with Apple Pay because it'll reduce fraud.

Reduaces fraud and most likely creates more spending because of how convenient it is. The banks are just being as ruthless as Apple and so holding back technology that the people want. They already have tokenisation as they offer it for their own apps on Android so deploying Apple Pay would be really quick and easy.


Give me it already!!

 

[tillsbury]

Don't be bummed out. We've had tap and go payment in Australia for over 3 years now. For transactions under $100, you just tap your credit card on their device and that's it. Paid.
Anything over that is insert the card (chip, not magnetic strip) and PIN number. Been that way for along time.

I find it weird when I visit the USA and have to sign for my credit card purchases.

If it's the same as NZ, you can tap and go for any value transaction. If the transaction is over the limit you are asked for your pin as well. I tap-and-go'd a NZ$20k purchase a few months back, just to see it if worked

I have my iphone in a wallet-type case, and with my main credit card in the right slot I can just tap the entire wallet to pay, rather than having to open it and get the card out.

 

[Bencmorrison]

Yeah, but how many people actually used it on their Android phones? At least in the US, nobody even mentioned Google Wallet until Apple Pay came along.

Contactless payments have been popular in Australia for several years. I like in the USA almost every retailer supports the pay wave function at their terminals. Since Chip and Pin is required in Australia pay wave is faster and easier. Some banks even issue a special card that you stick to the back of your phone so you don't have to pull your card out.

 

[bushido]

that will never come to Germany. people in line already roll their eyes when you take out your card to pay. one time i tried to pay at a grocery store with nfc, not a single staff member even knew its possible at their terminal so i gave up

 

[Boatboy24]

For those that don't understand how Apple can get away with charging a fee, I've heard theories that Apple could, if it wanted to, start its own bank and push hard to attract its users to move their money into it. So instead of Apple stealing banking customers/members away from banks, credit unions, and credit cards, Apple provides a secure and convenient service for its users that doesn't threaten financial institutions and might even excite some financial institutions if they see it as a way to attract more customers (we support ultra secure Apple Pay and neighbor bank doesn't). Think of how much it might have cost a bank to first implement online banking, P2P payments, etc., to stay relevant, then the fee might not seem actually cheap to also provide Apple Pay as a "bank with us" selling point.

And the way I see it, accepting Apple Pay should help these same banks significantly reduce their write offs due to fraudulent charges. That alone seems like a strong argument to me.